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Unformatted text preview: option command control a . 11 ratfirms * and y have the same P/E ratios, then chest markets, IFU If Firms x and i have the same net income, number of share also be e the sanding, and price per share, then their Big factors must 41 Firms X and Y have the same earnings Per in rat told market-top d . 1 am X'S P/E ra VE ratio exceeds that of Firm Y, then Y is 14k ratio, they must have the s s likely to to If Firms x and/or be expected to grow at a faster rate. X and Y have the same net income, number of shares husstanding, and price per share, then their market-to-book rat must also be the same 14 You observe that a firm's ROE is above the industry average, but profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT? Its total assets turnover must be above the industry average. b. Its return on assets must equal the industry average. c. Its TIE ratio must be d. Its total assets turnover t be below the industry average. e. Its total asset assets turnover nover must be below the industry average. cnover must equal the industry average. 15. Safeco's current assets total to $20 million versus $10 million of current liabilities, while Risco's sco's current assets are $10 million versus $20 million of current liabilities. Both firms would like to "window dress" their end-of-year financial statements, and to do so they tentatively plan to borrow $10 million on a short-term basis and to then hold the borrowed funds in their cash accounts. Which of the statements below best describes the results of these transactions? a . The. transactions would improve Safeco's financial strength as measured by its current ratio but lower Risco's current ratio. The transactions would lower Safeco's financial strength as measured by its current ratio but raise Risco's current ratio. . The transactions would have no effect on the firm' financial strength as measured by their current ratios. d. The transactions would lower both firm' financial strength as e . measured by their current ratios. The transactions would improve both firms' financial strength as measured by their current ratios. 16. Suppose Sally Smith plans to invest $1,000. She can earn an effective A annual rate of 58 on Security A, while Security B has an effective annual rate of 128. After 11 years, the compounded value of Security B should be more than twice the compounded value of Security A. (Ignore risk, ' and assume that compounding occurs annually.) True b. False 17 The present value of a future sum increases as either the discount rate or the number of periods per year increases, other things held constant....
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  • Spring '10
  • MNGT
  • Balance Sheet, Financial Ratio, Safeco, Risco

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